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jerryking : conglomerates   21

The GE-free Dow is the index our age deserves | Financial Times
Andrew Edgecliffe-Johnson 8 HOURS AGO

The avatar of American agglomeration is now slimming down to its aviation, healthcare and power businesses. Yet if you ask anyone who grew up around American kitchens or hardware stores what GE makes, they will probably mention fridges and lightbulbs. As its new chief, John Flannery, struggles to reverse the third steep slide in GE’s shares since the start of the century, one challenge he faces is that its brand is freighted with misconceptions. 
...The Dow tracks a mere 30 stocks, compared to the S&P’s 500; the points moves get increasingly meaningless as markets rise, and with no Facebook, Amazon, Netflix or Google it is missing most of the market-moving Faangs.
.......What earned GE its special place in the American imagination is that, in its conglomerate prime, it provided a similar guide to the US’s industrial evolution as it diversified from jet engines to television shows to finance. Even now, the company is as much a bet on healthcare.... as Walgreens,
........the Dow is as much a branding triumph as a GE fridge, and the story it tells best about the US economy is how it has come to be driven by brands........The market-movers of 1896 had solid, descriptive and quietly flag-waving names like Standard Rope & Twine, Pacific Mail Steamship and the North American Company. Today’s biggest businesses, like Apple, Alphabet and Amazon, are not defined by history, geography or even what they do. Instead, they stand as testaments to the rise of intangible assets at the expense of tangible goods — as does the survival of a well-marketed industrial average in a country where services are 80 per cent of GDP. 

The Dow no longer tells us much about American industry. But it still tells us plenty about America.
benchmarks  brands  conglomerates  DJIA  exits  FAANG  GE  indignities  intangibles  misconceptions  symbolism  indices  healthcare 
june 2018 by jerryking
GE and Siemens: power pioneers flying too far from the sun
November 12, 2017 | FT | by Ed Crooks in New York and Patrick McGee in Frankfurt.

Rivals GE and Siemens both face difficult challenges ahead with the threats emanating in the 21st century from the renewable energy revolution that risks rendering obsolete their century-old strengths in supplying equipment for the electricity industry.....As the costs of solar and wind power have plunged, making them cheaper than fossil fuel generation in many parts of the world, the traditional model of the industry has changed. Capital spending on the new technologies has soared. Battery storage is also starting to be a cost-effective solution for supporting the grid, challenging the market for “peaker” gas turbines that are used when demand is at its highest. Yet both groups have taken positions in renewable energy but have stumbled along the way.

The result is that GE and Siemens are being forced to drive down costs dramatically in their core power businesses. Siemens is looking to cut thousands of jobs in its power and gas unit....while both groups face a turbulent environment, the immediate outlook is considerably brighter at Siemens, which appears to be better positioned to adjust to the disruption sweeping through the energy industry....GE’s 2017 has been a disaster.....GE's CEO, John Flannery, has already moved fast to signal his intentions: clearing out many top executives, grounding corporate jets, stopping the cars provided to senior managers, cutting back the network of global research centres and promising to sell peripheral and underperforming businesses worth up to $20bn....GE's sales of aeroderivative gas turbines, used to support grids at times of peak load, were half the planned numbers, while sales of packages for improving the performance of gas-fired plants were just a third of projections.....“All major vendors got the market [i.e. for gas turbines] wrong,” ...The next big worry is servicing for turbines — once a gold mine but one that is bound to decline as new orders fall. With turbines being sold at no margin or sometimes at a loss, competition for servicing contracts is heating up, further eroding margins.

For the foreseeable future, the gas turbine market is likely to remain difficult,...“The question is whether this is just a cyclical problem, or whether there is something structural in the industry that is really starting to cause problems.”

There is good reason to think that it is structural, given the plunge in solar and wind costs. ... “a combination of rooftop solar and battery storage could make economic sense in India, African countries and other places where they don’t have well-developed power grids”......According to the IEA, in 2016 $316bn was invested in renewable energy worldwide last year, almost three times as much as the $117bn in fossil fuel power generation.....If Mr Flannery founders, then breaking up GE might come to seem like the only option left to investors. It would not magically dispel the problems of the business, and would be difficult because of the group’s complex tax position and liabilities, including insurance claims dating from before GE pulled out of the industry in 2004-2006.

To avoid a break-up, GE might follow the template Siemens created in 2014 for a more decentralised structure. Mr Kaeser calls it a “fleet of ships” model, with divisions becoming semi-autonomous and separately listed. Siemens’ largest division, its medical equipment unit, is scheduled to list next year.

“The time of old-fashioned conglomerates is over,” he says. “They are definitely not going to survive.”
CEOs  Siemens  GE  industrial_age  founders  19th_century  decentralization  conglomerates  renewable  obsolescence  solar  batteries  cost-cutting  turnarounds  divestitures  wind_power  under-performing  power_grid  electric_power 
november 2017 by jerryking
Global shipping boss charts course through troubled waters
August 14, 2017 | Financial Times | by Richard Milne.

When AP Moller-Maersk came under cyber attack this year, chief executive Soren Skou was presented with a very basic problem: how to contact anyone. The June attack was so devastating that the Danish conglomerate shut down all its IT systems. The attack hit Maersk hard. Its container ships stood still at sea and its 76 port terminals around the world ground to a halt. ...Skou had no intuitive idea on how to move forward....Skou was “at a loss”, but he decided to do three things quickly.
(1) “I got deep in.” He participated in all crisis calls and meetings. “To begin with, I was just trying to find out what was happening. It was important to be visible, and take some decisions,” he says. Maersk is a conglomerate, so IT workers needed to know whether to get a system working for its oil business or container shipping line first.
(2) He focused on internal and external communication. Maersk sent out daily updates detailing which ports were open and closed; which booking systems were running and more. It also constructed a makeshift booking service from scratch.
(3)Skou says he made sure frontline staff in the 130 countries it operates in were able to “do what you think is right to serve the customer — don’t wait for the HQ, we’ll accept the cost”.

He says that he has learnt there is no way to prevent an attack. But in future, the company must “isolate an attack quicker and restore systems quicker”. He adds that Maersk will now approach its annual risk management exercises in a different spirit. “Until you have experienced something like this — people call them ‘black swan’ events — you don’t realize just what can happen, just how serious it can be.”

Danish conglomerate AP Moller-Maersk is planning to expand into transport and logistics ...

....Mr Skou’s plan for Maersk is about shrinking the company to grow — a “counterintuitive” approach, he concedes. Maersk’s revenues have stagnated since the global financial crisis and the solution has been to jettison what has often been its main provider of profits, the oil business.

In its place, Mr Skou has already placed his bet on consolidation in the shipping industry.....His real push is in bringing together the container shipping, port terminals, and freight forwarding businesses so as to make it “as simple to send a container from one end of the world to the other as it is to send a parcel with FedEx or UPS”. That requires quite a cultural shift in a group where independence was previously prized.....Another priority is to digitalise the group. “It is pretty messy,” Mr Skou says cheerfully. Unlike most businesses selling to consumers who offer few possibilities to change much, almost everything is up for negotiation between Maersk and its business customers — from delivery time, destination, cost, speed, and so on. “It’s easy to talk about digitalising things; it’s quite difficult to do in a B2B environment. It’s hard to digitalise that complexity,”
crisis  crisis_management  malware  cyber_security  cyberattacks  conglomerates  black_swan  improbables  CEOs  Denmark  Danish  IT  information_systems  think_threes  post-deal_integration  internal_communications  counterintuitive  digitalization  shipping  ports  containers  Maersk 
august 2017 by jerryking
The Economy Needs Amazons, but It Mostly Has GEs
the country as a whole badly needs some rules-defying risk-taking. For business, that means a bit more Amazon in the boardroom and a bit less GE....The purchase of Whole Foods by Amazon introduced a level of volatility and turmoil (at least singularly to the retail sector) which had been absent from the market for a long time....The rest of the market remained placid. And months of historically low volatility has begun to look like dangerous complacency....... another, potentially more troubling explanation: stagnation. Muted markets may be an inevitable product of steady, sluggish growth, low and predictable interest rates, declining business startups and failures, and decreased competition. In other words, the problem is, there aren’t enough Amazons disrupting the stock market and the economy.....Jeffrey Bezos founded Amazon in 1994, he has prioritized expansion and innovation ahead of profit. In its early years, free cash flow—cash from operations minus CAPEX—hovered around zero. Mr. Bezos approaches new products like a VC. Many will flop (like the Fire smartphone), but some will be home runs (e.g. AWS). Amazon launched Prime, which offers free delivery in exchange for an annual fee, in 2005. John Blackledge, notes Amazon has repeatedly innovated in ways that make Prime even more valuable to subscribers.......Amazon is now profitable, yet cash retention remains secondary to building great products and delighting and retaining customers.

....If Amazon is one extreme in how companies invest, General ElectricCo. is the other. It has long been fastidious about capital and cash deployment......CEO Jack Welch perfected this approach in the 1990s.. it continued under Jeffrey Immelt. Last week, Mr. Immelt said he would retire, after 16 years struggling to restore growth. In part, that reflected how financial engineering had inflated profits under Mr. Welch. Yet Mr. Immelt ’s investment decisions too often chased the conventional wisdom on Wall Street and in Washington. ...........growth is hard for any company that dominates its markets as much as GE does. GE’s size also attracts debilitating political scrutiny. ....In response to new regulations and pressure from Wall Street, Mr. Immelt largely dismantled the business...........Investors still want GE to return cash to shareholders, and it has obliged,.....while good for shareholders in the short run, this is no recipe for growth in the long run. GE’s cash flow is shrinking despite the company’s focus on preserving it, while Amazon’s is growing despite that company’s readiness to spend it.......North American boardrooms desparately needs some rules-defying risk-taking. For business, that means a bit more Amazon in the boardroom and a bit less GE

[ See John Authers article which references Vix]

The "Minsky Moment" occurs when investors realize that they have paid far too much for the credits that have bought, no buyers can be found, and the system collapses. Aka Wile E. Coyote running-off-a-cliff....The greatest dangers to us are not from things we perceive to be high-risk, because we generally treat them carefully. Trouble arises from that which we perceive to be low-risk.
digital_economy  Amazon  GE  Amazon_Prime  risk-taking  volatility  Greg_Ip  stagnation  cash_flows  long-term  growth  start_ups  complacency  instability  conventional_wisdom  Jeffrey_Immelt  Jack_Welch  conglomerates  delighting_customers  capital_allocation  Jeff_Bezos  financial_engineering  rule_breaking 
june 2017 by jerryking
Conglomerates Didn’t Die. They Look Like Amazon. - The New York Times
Andrew Ross Sorkin
DEALBOOK JUNE 19, 2017

Amazon's purchase of Whole Foods re-opens the debate about conglomerates which supposed to be dead, a relic of a bygone era of corporate America as investors supposedly want smaller, nimbler, more focused companies......Amazon is just one of several digital-economy conglomerates. Alphabet, the parent company of Google, is another. Facebook is quickly becoming a conglomerate, too...... today’s tech-enabled conglomerates, are spending, and often losing, tens of billions of dollars annually on all sorts of projects and acquisitions that may or may not turn out to be successful. But investors are seemingly willing to give these new behemoths a free pass in the name of growth and innovation — until they aren’t.

If there is any lesson from the last breed of industrial conglomerates, it is that there is a natural life cycle to most of them....When it comes to Amazon (or Alphabet, or any of the new conglomerates), the question is whether there is something fundamentally different about these businesses given their grounding in digital information — especially as they expand into complex brick-and-mortar operations like upscale supermarkets.

In an age of big data and artificial intelligence, are businesses that look disparate really similar? And can one company’s leadership really oversee so many different businesses? When does it become too big to manage?...a recent article in the Yale Law Journal made a compelling case that Amazon has built perhaps the ultimate economic mousetrap — one impervious to the natural life cycle of a conglomerate, but one that might ultimately prove to be anticompetitive.

The author, Lina M. Khan, a Yale Law student who has written about antitrust law and competition policy, argued that Amazon had created a “platform market” and can use its size and scale to subsidize its entrance into new businesses through predatory pricing.....The economics of platform markets create incentives for a company to pursue growth over profits,.....Amazon’s role as both a distributor and cloud provider for many of its competitors gives it an unfair advantage. “This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors,”.....Jeff Bezos, is clear. The man who is assembling the 21st century’s most fearsome new conglomerate once explained his view of competition this way: “Your margin is my opportunity.”
conglomerates  Andrew_Sorkin  Jeff_Bezos  Amazon  GE  Jeff_Immelt  unfair_advantages  Whole_Foods  Silicon_Valley  digital_economy  Alphabet  Facebook  lessons_learned  Yale  Charles_Munger  antitrust  competition  Berkshire_Hathaway  platforms  predatory_practices  diversification  FTC  margins  staying_hungry  life_cycle  Lina_Khan  competition_policy 
june 2017 by jerryking
In House of Murdoch, Sons Set About an Elaborate Overhaul
APRIL 22, 2017 | The New York Times | By BROOKS BARNES and SYDNEY EMBER.

With James and his elder brother, Lachlan, 45, who is the executive chairman of 21st Century Fox, firmly entrenched as their father’s successors, they are now forcibly exerting themselves. Their father remains very involved, but his sons seem determined to rid the company of its roguish, old-guard internal culture and tilt operations toward the digital future. They are working to make the family empire their own, not the one the elder Murdoch created to suit his sensibilities.....The conglomerate, like its competitors, is facing an extremely uncertain future. Consumers are canceling or forgoing cable hookups and instead subscribing to streaming services like Netflix and Hulu, which 21st Century Fox co-owns. The movie business continues to grapple with piracy, rising costs and flat domestic attendance. Fox also has special problems: With competitors getting bigger — AT&T’s $85.4 billion purchase of Time Warner being Exhibit A — where does that leave the Murdochs?

“That’s a question I think they asked themselves and moved them to try to buy the rest of Sky,” said Michael Nathanson, an analyst at MoffettNathanson, referring to a pending $14.3 billion deal for 21st Century Fox to take full control of the British satellite TV giant.

At the moment, 21st Century Fox’s portfolio is relatively healthy. Fox News has continued to dominate in the ratings. The FX cable channel has found a steady stream of hits, including “Atlanta” and “The People v. O. J. Simpson.” The Fox broadcast network has struggled to find new must-see shows, but the company’s overseas channels and sports networks are thriving. In its most recent quarter, 21st Century Fox reported income of $856 million, a 27 percent increase from the same period a year earlier.
succession  Rupert_Murdoch  CATV  conglomerates  uncertainty  Netflix  Hulu  James_Murdoch  Lachlan_Murdoch  family-owned_businesses  Bill_O'Reilly  organizational_culture  sexual_harassment  Roger_Ailes  generational_change  digital_media  National_Geographic  CEOs  21st_Century_Fox  mass_media 
april 2017 by jerryking
Why Google Is Becoming Alphabet - The New Yorker
AUGUST 11, 2015
Google’s New Alphabetical Order
BY VAUHINI VARA
Alphabet  Google  diversification  conglomerates 
august 2015 by jerryking
Google’s Alphabet not your traditional conglomerate - The Globe and Mail
CARL MORTISHED
Google’s Alphabet not your traditional conglomerate
SUBSCRIBERS ONLY
LONDON — Special to The Globe and Mail
Published Wednesday, Aug. 12, 2015
Google  conglomerates  Alphabet 
august 2015 by jerryking
South Korea’s chaebol problem - The Globe and Mail
IAIN MARLOW - ASIA-PACIFIC CORRESPONDENT
SEOUL — The Globe and Mail
Published Friday, Apr. 24 2015

Economic observers suggest the chaebol are now thriving to the detriment of other players in the economy – hoarding profits, increasingly focusing on overseas factories, squeezing domestic suppliers, and preventing the growth of small and medium-sized enterprises (SMEs) that employ nearly 90 per cent of South Korean workers. There are also ongoing concerns about crony capitalism and the massive firms’ close relationship with the government.
chaebols  South_Korea  conglomerates  problems  family-owned_businesses  cronyism  crony_capitalism  The_One_Percent  political_elites  corporatism  supply_chain_squeeze  SMEs 
april 2015 by jerryking
Are book publishers blockbustering themselves into oblivion? - The Globe and Mail
RUSSELL SMITH
Special to The Globe and Mail
Published Friday, Nov. 28 2014

Whatever they mean, they certainly cannot mean a shrinking talent pool.

So they must mean that they are not, in fact, interested in the real talent pool, or in a wide variety of literature. What they are looking for are bestsellers, which tend to be particularly narrow kinds of books. Most of the gargantuan advances that have made headlines in the U.S. recently are for science-fiction and fantasy books. Every publisher is looking for exactly the same book – basically, they are looking for The Hunger Games again and again. When they say “quality,” they mean “mass appeal.”...But in concentrating on bestsellers to the detriment of other literature, the publishers are simply following the model of all the entertainment industries. Providing an eclectic variety of entertainments to please a diverse audience, as the free Internet can do, just hasn’t been lucrative for the conglomerates that own film studios and recording labels. They are in constant search of blockbusters.

As they grow larger and concentrate their efforts and investments on massive, sure-fire hits – the next Marvel movie, the next Taylor Swift album – the cultural landscape seems paradoxically smaller. It becomes even more difficult to get an indie film made – the huge projects suck the oxygen (financing, distribution, media coverage) out of the biosphere.

In following this larger trend, book publishers are shortsighted. By reducing their involvement in original and challenging art, they relinquish literary fiction to the tiny presses and online magazines, and so become artistically irrelevant and, in the long run, uninteresting even as suppliers of entertainment. Pursuing mainstream popularity with ever-larger sums of money is ultimately self-destructive....Yes, such high-mindedness is all very well for someone who doesn’t have to keep a money-losing, employment-providing company afloat. And Le Guin’s vague rejection of capitalism is not a solution to the immediate problems facing publishers. But her point about taking the long view – about concentrating on valuable literature for the sake of the industry’s general health – is surely a practical one as well.
books  publishing  Russell_Smith  literature  blockbusters  art  short-sightedness  conglomerates  indie  winner-take-all  Amazon  writers  long-term  self-destructive  talent_pools 
november 2014 by jerryking
Nigeria's one-man conglomerate
September 7/8, 2013 | Financial Times | The Lex Column. Profile of Aliko Dangote
Nigeria  entrepreneur  moguls  Nigerians  Aliko_Dangote  conglomerates 
september 2013 by jerryking
Return of the giants
November 2012 | Economist | Adrian Wooldridge
conglomerates  Tata  diversification  Samsung 
january 2013 by jerryking
What Greece Makes, the World Might Take - NYTimes.com
By ADAM DAVIDSON
Published: July 3, 2012

In the last decade or so, companies in the United States, France, Denmark and elsewhere flouted the feta ruling and invested in their own food-science research and manufacturing equipment. They subsequently turned the salty, crumbly cheese into spreadable, grillable, fat-free and shelf-stable forms. In Italy and Spain, small olive-oil producers merged into globally competitive conglomerates and replaced presses with more efficient centrifugal technology. The two countries now provide nearly all the world’s supply. And the Greeks, despite their numerous inherent advantages, remain in the least profitable part of the supply chain, exporting raw materials at slim margins.

Tassos Chronopoulos, owner of Tassos, a Greek food importer based outside Chicago, says that the country’s disorganized agricultural business all but disqualified itself from partaking in the fancy-food craze of the past few decades. Greek growers never banded together to establish uniform quality standards and trade rules.
agribusiness  agriculture  cheese  competitiveness_of_nations  conglomerates  dairy  Denmark  disorganization  disunity  economic_development  farming  food  food_science  foodies  foodservice  France  gourmet  Greece  Greek  innovation  olive-oil  quality  quality_control  rules_of_the_game  standardization  technical_standards  supply_chains  value_chains 
july 2012 by jerryking
Low-key choice for high-profile Tata Group - The Globe and Mail
James Lamont
New Delhi— Financial Times
Posted on Wednesday, November 23, 2011
Tata  appointments  conglomerates  low-key 
november 2011 by jerryking
FT.com / Companies / Financial Services - Louis Dreyfus considers options for reinvention
September 23 2010|FT| By Javier Blas. When Léopold
Louis-Dreyfus, the 18-yr-old son of a farmer from Alsace, started in
1851 buying wheat from local farmers and selling it in a market town, he
could not have dreamed how his grain trading business would grow over
the next 150 years (remaining family-owned and expanding into a
conglomerate including cereals, ships and weapons).Today, Louis Dreyfus
Commodities, still controlled by descendants of Léopold, is one of the
world’s largest agricultural commodities trading houses, rivalling
competitors such as Illinois-based Archer Daniels Midland, New
York-based Bunge and Minneapolis-based Cargill. The four, known because
of their initials as the industry’s “ABCD”, dominate global flows of
agricultural raw materials. The French family-owned group is considering
a radical change of ownership, exploring options, including an initial
public offering or the sale of a stake to long-term investors.
family-owned_businesses  agriculture  commodities  conglomerates  food_crops  Cargill  Louis_Dreyfus  ADM  grains  traders  options  reinvention 
september 2010 by jerryking
More Can Be More - WSJ.com
OCTOBER 25, 2004 | Wall Street Journal | by MARK MAREMONT. The use of conglomerates to achieve growth.
conglomerates  growth  diversification 
february 2010 by jerryking

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